CAD is unable to resist USD advance and risks a retest of 1.40 – Scotiabank

The Canadian Dollar (CAD) is little changed in overnight trade, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

CAD remains soft

"The stronger US Dollar (USD) tone overall plus wider short-term spreads account for the softness in the CAD but spot is trading quite significantly above fair value (1.3741 this morning) still which may help constrain the USD advance a little."

"But, with the Canadian economy weak and the Bank of Canada back in play, investors have little reason to try and pick a bottom for the CAD right now. We still rather think these sorts of levels provide good value for USD sellers but interest remains very light, on the face of it. Canadian industry-level GDP is expected to rise 0.1% in July for a 0.7% rise in output over the year, down from June’s 0.9% gain."

"Solid gains on the week through resistance at 1.3925 (now minor support) leave the USD looking at a test of the 1.40 area at least in the short run. The 200-day MA sits right around the figure (1.3998) and there is retracement resistance (38.2% of the February/June decline) at 1.4019."